Innovator companies are constantly looking for ways to compete with generic-drug manufacturers. The former have tried to improve or reformulate their products and to extend patent protection. But sufficiently big innovator companies have another option: they can buy their generic competitors.

Generics company Actavis (Hafnarfjordur, Iceland) may be put on the auction block as soon as this week. Its owners hope to make 8 billion Euro ($11 billion). They have a shot at reaching their goal, considering the number of heavy hitters who might make bids for the company. According to a story in last Thursday’s Financial Times, Pfizer (New York), Sanofi-Aventis (Paris), Novartis (Basel), and GlaxoSmithKline (London) have all expressed interest in Actavis.

The Financial Times story mentions a “growing desire by innovative drug makers to diversify into generics.” This desire has been manifested in several recent deals such as Sanofi’s purchase of Zentiva (Prague), and in Daiichi-Sankyo’s (Tokyo) acquisition of Ranbaxy (Gurgaon, India).

It remains to be seen whether these mergers will be successful in the long run. But Daiichi–Sankyo’s experience shows that buying generics companies has its risks, at least in the short term. The Japanese company had to write down its $5.3-billion purchase of Ranbaxy because shares of the Indian company lost 66% of their value after Daiichi bought them. The write-down might lead to an annual loss for Daiichi.

Despite its risks, the strategy of acquiring generics companies is not likely to be abandoned as Big Pharma seeks to stay one step ahead of its competition.